Morning Bid: Wrong sort of 'boom' to start the week

• Brent crude retreated from Monday's gains after U.S. 'defensive' strikes on Iran, though prices remain below $100 per barrel as peace deal hopes persist
• Fed futures now price in at least one rate hike over the next year, with once-dovish board member Christopher Waller signaling he would vote to remove the Fed's 'pause bias' language
• Chinese chipmaker stocks surged 6% on Huawei's announcement of plans to develop industry-leading semiconductors in five years, highlighting Beijing's efforts to circumvent U.S. sanctions

Market Summary: Geopolitical Tensions Override Peace Hopes

Key Developments:

Markets returned from the long U.S. holiday weekend anticipating positive momentum from potential Iran peace negotiations, but fresh U.S. military strikes on Iranian targets Tuesday dampened sentiment. Brent crude initially fell below $100 per barrel on peace hopes before reversing some losses following the strikes, though remaining under the $100 threshold.

Peace Plan Details:

The proposed agreement includes a 60-day ceasefire extension and eventual reopening of the Strait of Hormuz. However, President Trump's addition of a requirement for regional states to normalize relations with Israel and Secretary of State Marco Rubio's acknowledgment that negotiations "could take a few days" introduce uncertainty.

Equity Markets:

European stocks rallied Monday, with futures pointing higher Tuesday despite the geopolitical setback. Asian markets showed strength, particularly in the technology sector.

China Tech Spotlight:

Chinese chipmaker stocks surged after Huawei Technologies announced plans to produce industry-leading semiconductors using new technology within five years, demonstrating progress despite U.S. sanctions. Hong Kong's chipmaker index jumped 6%, led by Hua Hong Semiconductor and SMIC.

Central Bank Outlook:

Federal Reserve policy is shifting hawkish, with board member Christopher Waller supporting removal of dovish language from policy statements. Fed futures price in at least one rate hike over the next year, while the ECB and Bank of Japan are expected to raise rates as soon as next month due to persistent inflation concerns from elevated gas prices.

Data Watch:

U.S. May consumer confidence data headlines Tuesday's economic calendar and will be closely scrutinized given deteriorating University of Michigan sentiment readings.